DEFENSE HEALTH 

CARE REFORM

Additional 

Implementation 

Details Would 

Increase Transparency 

of DOD’s Plans and 

Enhance 

Accountability

Report to Congressional Committees

November 2013

GAO-14-49

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-49, a report to 

congressional committees

November 2013

DEFENSE HEALTH CARE REFORM

Additional Implementation Details Would Increase 

Transparency of DOD’s Plans and Enhance 

Accountability 

Why GAO Did This Study

Over the past decade, the cost of 

DOD’s MHS has increased to almost 

$50 billion and is expected to double 

by 2030. Section 731 of the National 

Defense Authorization Act for Fiscal 

Year 2013 required DOD to provide 

three submissions detailing its plan to 

reform its MHS governance structure

and also mandated that GAO submit 

an analysis of DOD’s first two 

submissions. This report addresses the

extent to which DOD’s March and June 

2013 submissions met the statutory 

requirements and reflect key 

management practices. GAO 

compared DOD’s submissions for 

reforming its MHS governance 

structure with the (1) statutory 

requirements and (2) key management 

practices contained in GAO’s Business 

Process Reengineering Assessment 

Guide and other relevant GAO work. 

Additionally, GAO interviewed DOD 

officials from the Office of the Assistant 

Secretary of Defense for Health Affairs, 

the MHS Transition Office, and the 

military services’ Surgeons General

offices. 

What GAO Recommends

To provide decision makers with more 

complete information on the 

implementation of DOD’s newly 

created DHA, GAO recommends that

DOD develop and present to Congress

fully developed performance 

measures, interim timelines, and 

staffing baseline assessments, and

refined cost savings estimates. In 

written responses to this report, DOD 

concurred with each of GAO’s 

recommendations.

What GAO Found

GAO determined that the Department of Defense’s (DOD) March and June 2013 

submissions on establishing a Defense Health Agency (DHA) to reform the 

governance of the Military Health System (MHS) met three statutory

requirements to include information on goals, performance measures, and 

staffing; partially met one requirement to include information on timelines; and 

was not required to include information on shared services because the reporting 

time frame was not applicable. GAO also assessed the submissions to determine 

the extent to which DOD incorporated key management practices from GAO’s

prior work on business-process reengineering. DOD’s submissions provided 

some useful information but did not fully incorporate some key management 

practices as explained below. 

• DOD presented 87 performance measures under its seven goals for its MHS 

reform. However, those measures do not fully exhibit the attributes of 

successful performance measures that can help agencies determine whether

they are achieving their goals as well as identify areas for improvement. 

Examples of key attributes include clarity, measurable targets, and baseline 

data. None of DOD’s measures included an accompanying explanation, 

definition, or a quantifiable target nor did they include information regarding 

relevant baseline assessments. 

• DOD provided a list of major governance milestones and an overall schedule 

for activities related to establishing the DHA. However, DOD’s 

implementation timeline did not include interim milestones for four of the 

seven goals of its reform. A key practice for agencies undergoing business 

transformations is to develop a detailed implementation plan with milestones 

for all actions so that progress can be closely monitored. 

• In its June submission, DOD provided an estimate of authorized staff needed 

as of October 1, 2013, for the DHA. However, DOD does not have the 

information to determine how the creation of the DHA will affect the total 

number of MHS headquarters staff because it has not completed an updated 

baseline assessment of current staffing levels. Key management practices 

require agencies to be aware of the size, knowledge, skills, and abilities of 

their workforces to pursue their missions. DOD planned to submit revised 

estimated staffing levels in a September 30, 2013 submission to Congress. 

• DOD presented business cases that included a breakdown of estimated 

implementation costs and aggregated cost-savings estimates for the 

consolidation of four shared services. However, some key details of a sound 

business case were missing, such as the basis for the savings. DOD’s 

business cases aggregated the separate business lines of its shared 

services, which obscures the size and cost of planned efficiencies for each 

discrete business line, and it did not assess the risk that implementation 

costs could increase.

Without more clear, complete, and transparent information on DOD’s plan for 

establishment of the DHA, it will be difficult for decision makers to gauge 

progress and identify areas of risk that will need to be monitored during 

implementation. 

View GAO-14-49. For more information, 

contact Brenda S. Farrell at 202-512-3604 or 

farrellb@gao.gov. 
Page i GAO-14-49 DOD's 2013 Medical Governance Plans

Letter 1 

Background 4

DOD’s Submissions for Its MHS Reform Largely Met Statutory 

Requirements but Did Not Fully Incorporate Some Key 

Management Practices 13

Conclusions 27

Recommendations for Executive Action 28

Agency Comments 28

Appendix I Comments from the Department of Defense 31

Appendix II GAO Contact and Staff Acknowledgments 32

Related GAO Products 33

Table

Table 1: Attributes of Performance Measures 18

Figures

Figure 1: Organizational Structure of the Military Health System 

Prior to October 1, 2013 6

Figure 2: Military Health System Governance Transition 

Organizational Structure 8

Figure 3: Proposed Defense Health Agency Organizational Chart 10

Contents 
Page ii GAO-14-49 DOD's 2013 Medical Governance Plans

Abbreviations

DHA Defense Health Agency

DOD Department of Defense

JTF CAPMED Joint Task Force National Capital Region Medical

MHS Military Health System

OASD HA Office of the Assistant Secretary of Defense for Health 

 Affairs

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Page 1 GAO-14-49 DOD's 2013 Medical Governance Plans

441 G St. N.W.

Washington, DC 20548

November 6, 2013

Congressional Committees

On October 1, 2013, the Department of Defense (DOD) established a 

new Defense Health Agency (DHA) to assume management 

responsibility of numerous functions of its medical health care system. 

This change comes after a long series of studies since 1949 addressing 

the issue of the governance structure of DOD’s Military Health System 

(MHS). DOD faces increasing pressure on its budgetary resources, and in 

a March 2013 memorandum directing the establishment of a DHA, the 

Secretary of Defense noted that DOD needs to be responsive to current 

fiscal challenges facing the nation. Over the past decade, the Defense 

Health Program budget has grown substantially, from $19 billion in fiscal 

year 2001 to the fiscal year 2014 budget request of $49.4 billion. Further, 

the Congressional Budget Office has projected MHS costs to reach about 

$92 billion by 2030. As health care consumes an increasingly large 

portion of the defense budget, DOD leadership has acknowledged the 

need to reduce duplication and overhead, operate its health system as 

efficiently as possible, and realize savings in the MHS through the 

adoption of common clinical and business processes. In recent years, 

numerous sources such as the Defense Business Board in 2006,1

Defense Health Board in 2007,2 and DOD-initiated internal efficiency 

 

1

The Defense Business Board stated that DOD may not be fulfilling its obligations under 

public law requiring consolidation of shared services. Defense Business Board, Military 

Health System-Governance, Alignment and Configuration of Business Activities Task

Group Report, Report to the Secretary of Defense, Report FY06-5, September 2006. 

2

The Defense Health Board noted in its 2007 report that although consolidation and 

centralization are occurring at the military service level, fragmentation still exists at the 

MHS enterprise level. Defense Health Board, Task Force on the Future of Military Health 

Care Final Report, December 2007. 

 
 

Page 2 GAO-14-49 DOD's 2013 Medical Governance Plans

reviews,3 as well as our previous reviews of DOD’s medical governance,4

have identified areas for reform of DOD’s health care system. As a result, 

DOD established the DHA and chartered an implementation planning 

team consisting of officials from throughout the MHS to provide continuing 

oversight, management direction, and support of this reform.

Following DOD’s 2012 decision to implement this reform to the 

governance of the MHS, the National Defense Authorization Act for Fiscal 

Year 2013 required that DOD create a detailed implementation plan for 

carrying out its health care system reform, and provide it to the 

congressional defense committees in three separate submissions in fiscal 

year 2013. In a submission due no later than March 31, 2013, Congress 

required DOD to provide goals it is to achieve while carrying out the 

reform along with a detailed schedule to carry out the reform, including a 

schedule for meeting its goals. In a second submission, due no later than 

June 30, 2013, Congress required DOD to provide metrics to evaluate the 

achievement of each goal, the required personnel levels, and specific 

information on the shared services5 that DOD planned to implement 

during fiscal year 2013. In the third submission, due no later than 

September 30, 2013, Congress required DOD to provide details 

concerning the shared services it planned to implement during fiscal year 

2014. DOD provided its first submission to the congressional defense 

committees on March 15, 2013, and its second submission on June 27, 

2013.

 

3

The Secretary of Defense directed a series of initiatives to move the defense enterprise 

toward a more efficient, effective, and cost-conscious way of doing business, in part, by 

reducing excess and duplication. See, for example, Secretary of Defense Memorandum, 

Department of Defense (DOD) Efficiency Initiatives, Memorandum (Aug. 16, 2010) and 

Secretary of Defense Memorandum, Track Four Efficiency Initiatives Decisions, 

Memorandum (Mar. 14, 2011).

4

GAO, Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, and 

Risks for Its Newly Approved Medical Command Structure, GAO-08-122 (Washington, 

D.C.: Oct. 12, 2007); Defense Health Care: Applying Key Management Practices Should 

Help Achieve Efficiencies within the Military Health System, GAO-12-224 (Washington, 

D.C.: Apr. 12, 2012); Defense Health Care: Additional Analysis of Costs and Benefits of 

Potential Governance Structures Is Needed, GAO-12-911 (Washington, D.C.: Sept. 26, 

2012).

5

According to DOD, a shared services concept is a combination of common services 

performed across the medical community. DOD identified 10 shared services it plans to 

implement: medical logistics, facility planning, health information technology, health plan 

management, pharmacy, medical education and training, medical research and 

development, public health, acquisition, and budget and resource management.
 

Page 3 GAO-14-49 DOD's 2013 Medical Governance Plans

The National Defense Authorization Act for Fiscal Year 2013 further

required that GAO submit to the congressional defense committees a 

review of the contents of the first two submissions of DOD’s plan to 

assess whether DOD met the statutory requirements. In May 2013, we 

provided a briefing to the committees on information that included the 

extent to which DOD’s March 2013 first submission on its plan for MHS 

governance reform contained the statutorily required elements of goals 

and a schedule for achievement of those goals. We also included our 

preliminary observations on how well DOD’s goals linked to the proposed 

responsibilities of its new DHA and how the schedule could be improved 

by incorporating features that we have found to be useful in effective 

planning for achieving performance and cost-savings goals. As a result of 

that briefing to the House Armed Services Committee personnel, the 

House Report accompanying a bill for the National Defense Authorization 

Act for Fiscal Year 2014 included language that directed the Secretary of 

Defense to provide the House Armed Services Committee with additional 

information to address the shortcomings that we had identified. DOD 

provided additional information to respond to the shortcomings we had 

identified regarding DOD’s first submission in its June 2013 second 

submission and a supplemental report to the committee on August 16, 

2013. For this report, we are consolidating the results of our review of 

both DOD’s March and June 2013 submissions to Congress. Accordingly, 

our objective for this report was to determine to what extent DOD’s March 

and June 2013 medical governance submissions address statutory 

requirements and reflect key management practices.

To determine the extent to which DOD’s March and June 2013 

submissions of its plan to reform its MHS governance address the 

statutory requirements, we obtained and reviewed both of DOD’s 

submissions to the congressional defense committees and the elements 

required by the National Defense Authorization Act for Fiscal Year 2013. 

We compared the two to determine the submissions’ compliance with the 

statutory requirements. We rated compliance for each requirement as 

“addressed,” “partially addressed,” or “not addressed.” We considered the 

requirement to be “addressed” in the submission when DOD explicitly 

addressed all parts set forth in the requirement. We considered the 

requirement “partially addressed” in the submission when DOD 

addressed at least one or more, but not all, parts of the requirement. We 

considered the requirement “not addressed” by DOD when the 

submission did not explicitly address any part of the requirement. Further, 

to determine the extent to which these medical governance submissions 

reflected key management practices as identified in GAO’s Business 

Process Reengineering Assessment Guide and other leading practices 
 

Page 4 GAO-14-49 DOD's 2013 Medical Governance Plans

we have identified in our prior work,6 we focused our review specifically 

on the information contained in the March and June 2013 medical 

governance submissions DOD submitted to Congress. Using our prior 

work that identified key management practices and key characteristics of 

effective planning for achieving performance and cost-savings goals, we 

determined whether DOD’s March and June 2013 submissions included 

information consistent with those practices or characteristics. Additionally, 

we analyzed DOD’s August 16, 2013, supplemental report7 to determine if 

the information it provided was consistent with our identified key 

management practices. Further, we conducted interviews with officials, 

including those from the Office of the Assistant Secretary of Defense for 

Health Affairs (OASD HA), the MHS Governance Transition Office, the 

Offices of the Surgeons General for the Army, the Navy, and the Air 

Force, and the TRICARE Management Activity to clarify how DOD’s 

submissions were developed and to understand the structure that DOD 

has established to manage its transition to a DHA.

We conducted this performance audit from March 2013 to November

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The MHS is a complex organization that provides health services to 

almost 10 million beneficiaries across a range of care venues, including 

the battlefield, traditional hospitals and clinics at stationary locations, and 

authorized civilian providers. As we reported in 2005, DOD’s health care 

system is an example of a key challenge facing the U.S. government in 

 

6

GAO, Business Process Reengineering Assessment Guide, GAO/AIMD-10.1.15 (May 

1997); Streamlining Government: Questions to Consider When Evaluating Proposals to 

Consolidate Physical Infrastructure and Management Functions, GAO-12-542

(Washington, D.C.: May 23, 2012); GAO-12-224. 

7

Subsequent to DOD’s March submission, the House Report accompanying the proposed 

National Defense Authorization Act for Fiscal Year 2014 directed the Secretary of Defense 

to provide the House Armed Services Committee with additional information about the 

DHA’s milestones and goals. In response, DOD submitted a supplemental report on 

August 16, 2013.

Background 
 

Page 5 GAO-14-49 DOD's 2013 Medical Governance Plans

the 21st century as well as an area in which DOD can achieve economies 

of scale and improve delivery by combining, realigning, or otherwise 

changing selected support functions.8 Additionally, in 2011, we reported 

that the responsibilities and authorities for DOD’s military health system 

were distributed among several organizations within DOD with no central 

command authority or single entity accountable for minimizing costs and 

achieving efficiencies.9 Under the MHS command structure that existed 

prior to October 1, 2013, the OASD HA, the Army, the Navy, and the Air 

Force each had its own headquarters and associated support functions, 

such as information technology, human capital management, financial 

activities, and contracting. Additionally, the three services’ Surgeons 

General were responsible for overseeing their deployable medical forces 

and operating their health care systems.10 OASD HA manages the 

Defense Health Program budget, but this office does not directly 

supervise the services’ medical personnel. See figure 1 for the 

organizational structure prior to October 1, 2013.11

 

8

GAO, 21st Century Challenges: Reexamining the Base of the Federal Government,

GAO-05-325SP (Washington, D.C.: February 2005).

9

GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax 

Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011).

10With the creation of the DHA, the services’ Surgeons General will continue to be 

responsible for overseeing medical forces and operating health care systems including 

Military Treatment Facilities. 

11Under the new governance structure, the Assistant Secretary of Defense for Health 

Affairs will maintain these same responsibilities. 
 

Page 6 GAO-14-49 DOD's 2013 Medical Governance Plans

Figure 1: Organizational Structure of the Military Health System Prior to October 1, 2013

a

The Joint Task Force National Capital Region Medical (JTF CAPMED) was an additional medical 

organizational structure and reporting chain that was established in 2007 to manage the Military 

Treatment Facilities within the National Capital Region and the execution of related 2005 Base 

Realignment and Closure actions in that area. The JTF CAPMED and its Commander reported to the 

Secretary of Defense through the Deputy Secretary of Defense. The two inpatient medical facilities in 

the area, Walter Reed National Military Medical Center and Fort Belvoir Community Hospital, were 

directed by the Deputy Secretary of Defense in January 2009 to become joint commands.

b

DOD provides civilian health care to millions of eligible beneficiaries through its TRICARE program, 

which was managed by the TRICARE Management Activity prior to October 1, 2013.

Over the years, many efforts to control the increase in health care costs 

led to a long series of studies to address the governance structure of the 

MHS and to recommend major organizational realignments. Most 

recently, in March 2011, the Deputy Secretary of Defense established an 

internal task force to conduct a review of the governance of the MHS. The 

task force identified (1) cost containment, (2) greater integration, and (3) 

increased unity of effort as priority objectives for the MHS. The task 

force’s September 2011 report noted the need for clear decision authority 

and accountability. Following numerous internal discussions, DOD 

submitted a report to Congress in March 2012 outlining various options 
 

Page 7 GAO-14-49 DOD's 2013 Medical Governance Plans

for reforming the MHS governance, including creating a DHA. 

Additionally, at that time, the Deputy Secretary of Defense directed DOD 

leadership to develop an implementation plan that would center on the 

establishment of a DHA. As a result of that direction, the department 

began implementation planning for this change, including organizational 

changes.

To help ensure that the department maintained momentum on this 

reform, the Deputy Secretary of Defense directed the formation of a team 

to develop an implementation plan for the governance changes. As a 

result, the Assistant Secretary of Defense for Health Affairs established a 

chartered MHS Governance Transition Organization to provide oversight, 

management, and support for the implementation of MHS governance 

reforms in March 2013.12 This transition organization consists of 

individuals, an action group, an advisory council, along with a review 

board, each with specific roles and responsibilities. This organization is 

chartered to exist until October 2015, when the DHA is expected to reach 

full operating capability. The formation of this MHS Governance 

Transition Organization addresses a concern that we expressed to DOD 

in a previous report13 about how DOD did not form an overarching team to 

manage the implementation of a 2006 attempt to institute changes to its 

medical governance structure. See figure 2 for a diagram of the MHS 

Governance Transition Organization.

 

12The MHS Governance Transition Organization Charter was signed on March 25, 2013.

13GAO-12-224. 

MHS Governance 

Transition Organization 

Chartered to Direct 

Reform 
 

Page 8 GAO-14-49 DOD's 2013 Medical Governance Plans

Figure 2: Military Health System Governance Transition Organizational Structure

The roles and responsibilities of the primary leaders within the MHS for 

overseeing the governance reform are as follows:

• The Deputy Secretary of Defense serves as the final decision maker

on all changes to MHS governance.

• The Under Secretary of Defense for Personnel and Readiness will 

approve the implementation plans.

• The Military Health System Executive Review, which is chaired by the 

Under Secretary of Defense for Personnel and Readiness and has 

other members such as the Vice Chiefs of Staff for the three services 

as well as the Director of the Joint Staff, will provide a forum for 
 

Page 9 GAO-14-49 DOD's 2013 Medical Governance Plans

dispute resolution and oversight of MHS governance transition and 

implementation activities.

• The Assistant Secretary of Defense for Health Affairs is accountable 

for the overall management and direction of the MHS Governance 

Transition Organization.

• The Senior Military Medical Advisory Council, which is chaired by the 

Assistant Secretary of Defense for Health Affairs and includes the 

service Surgeons General and others, will review, recommend, and 

advise the Assistant Secretary of Defense for Health Affairs on 

service-specific implementation issues.

• The Medical Deputies Action Group, which consists of the service 

Deputy Surgeons General, the Joint Staff Surgeon, and a DHA 

representative, and is chaired by the Principal Deputy Assistant 

Secretary of Defense for Health Affairs, provides oversight of the 

detailed activities of the transition office and its subordinate transition 

teams.

• The MHS Governance Transition Office provides oversight of day-today implementation activities, to include such actions as (1) 

integrating all transition teams’ activities; (2) compiling all 

implementation costs, cost savings, and cost avoidance that result 

from transition activities, and (3) updating higher management at least 

weekly on progress and issues, and developing reports, 

presentations, and other necessary documents.

The MHS Governance Transition Organization with its component parts is 

working to implement the governance reforms laid out by the Deputy 

Secretary of Defense to establish the DHA that will support the execution 

of policy, manage the military’s health plan, manage medical operations 

within the National Capital Region,14 and provide shared services. In 

doing so, the DHA will support the services in execution of their medical 

missions. See figure 3 below for the organizational chart of the proposed 

DHA.

 

14 The National Capital Region is the geographic area that includes Washington, D.C., 

and other specific surrounding cities and counties in both Maryland and Virginia.

DHA Organizational 

Structure Establishes 

Centralized Accountability 

for Consolidated Shared 

Services
 

Page 10 GAO-14-49 DOD's 2013 Medical Governance Plans

Figure 3: Proposed Defense Health Agency Organizational Chart

Officials discussed the proposed DHA organization with us and provided 

general descriptions of the subordinate directorates shown in figure 3. 

According to these officials,

• the proposed Healthcare Operations Directorate would manage MHS 

operations in such areas as pharmacy, public health issues, the 
 

Page 11 GAO-14-49 DOD's 2013 Medical Governance Plans

warrior care program, clinical support, readiness, and the health plan 

for beneficiaries; 

• the proposed Research and Development Directorate would manage 

MHS operations in the area of medical research and development 

issues; 

• the proposed Health Information Technology Directorate would 

manage MHS operations in such areas as information security and 

privacy, information delivery, infrastructure and operations, and 

innovation;

• the proposed Education and Training Directorate would manage MHS 

operations in the area of medical education and training for all MHS 

personnel;

• the proposed Business Support Directorate would manage MHS 

operations in such areas as facility planning, medical logistics, budget 

and resources management, acquisition management, and 

contracting; and

• the proposed National Capital Region Directorate would exercise 

authority, direction, and control over the inpatient facilities and 

subordinate clinics to deliver healthcare to eligible beneficiaries—

military personnel and their dependents, eligible National Guard and 

Reserve personnel and their dependents, and retirees and their 

dependents and survivors—in the National Capital Region.

According to DOD’s March and June 2013 medical governance 

submissions to Congress, its plan to reform the MHS governance 

structure is intended to further integrate its health care delivery system 

and to enhance the way resources and care are coordinated and 

redistributed across a variety of delivery sites to best address population 

needs. In 2003 the Under Secretary of Defense for Personnel and 

Readiness designated responsibilities and authorities for Multi-Service 

Markets,

15 which included common appointment processes, referral 

management, and capacity and workload planning. DOD’s June 2013 

submission states that the initial attempts to implement this concept 

 

15Multi-Service Markets are areas in which more than one DOD component provides 

military health care services.
 

Page 12 GAO-14-49 DOD's 2013 Medical Governance Plans

demonstrated some success. Further, DOD’s first submission states that 

substantial improvements in clinical and business processes will occur, 

and major reductions in cost through standardized processes and 

recapture of private-sector care are most achievable at this multiservice 

market level. As such, DOD has designated six areas throughout the 

country as enhanced Multi-Service Markets16 that will implement 5-year 

performance plans to produce improvements in clinical and business 

practices and cost, infrastructure, and personnel reductions. The details 

of how these improvements will be achieved and their yearly cost and 

performance targets are to be specified in performance plans that are to

be submitted to the Assistant Secretary of Defense (Health Affairs) 

through both the Medical Deputies Action Group and the Senior Military 

Medical Advisory Council as part of the MHS governance reform. 

Additionally, because the enhanced Multi-Service Markets managers will 

be accountable for performance of military treatment facilities operated by 

more than one military service, DOD has reported that it has established 

a new governance structure with representation from the three services, 

and the DHA has been implemented to provide oversight for the planning, 

implementation, and execution of business performance plans.

A final component of the new DHA is the establishment of the National 

Capital Region Directorate. According to DOD, this arrangement keeps 

the joint organizational structure of the two inpatient hospitals within the 

National Capital Region—Walter Reed National Military Medical Center at 

Bethesda and Fort Belvoir Community Hospital—as well as allowing a 

reduction to the number of intermediate-level headquarters’ overhead 

positions.

 

16The six multiservice markets identified are Tidewater, Virginia; Colorado Springs, 

Colorado; San Antonio, Texas; Puget Sound, Washington; Hawaii; and the National 

Capital Region. 
 

Page 13 GAO-14-49 DOD's 2013 Medical Governance Plans

The National Defense Authorization Act for Fiscal Year 2013 required that 

DOD’s first two submissions on health care governance reform to 

Congress include (1) goals to achieve while carrying out the reform, (2) 

performance measures to evaluate the achievement of each goal, (3) the 

required personnel levels, (4) a detailed schedule for carrying out reform 

goals including a schedule for meeting the goals, and (5) detailed 

information in a business-case analysis for each shared service to be 

implemented during fiscal year 2013. In its March and June 2013 

submissions of its plan for the MHS governance reform, DOD addressed 

the first three statutory requirements, partially addressed the fourth, and 

was not required to address the last item. Specifically, in its submissions, 

DOD presented (1) one overall and seven subordinate goals of its reform, 

(2) performance measures it plans to use to evaluate the achievement of 

each of the goals, and (3) an estimate of the personnel levels required for 

the DHA. However, DOD partially addressed its statutory requirement to 

provide information about its schedule for carrying out the reform because 

it presented milestones for only four of the seven subordinate goals. 

Lastly, the statute required DOD to present detailed information in a 

business-case analysis for each shared service that was implemented 

during fiscal year 2013. However, DOD did not plan to implement any 

shared services in fiscal year 2013, and thus it was not required by 

statute to provide business case analyses for any shared services. 

Nonetheless, DOD included a discussion of the first four shared services 

it plans to implement in fiscal year 2014, which were medical logistics, 

facilities planning, health information technology, and the health care 

plan. DOD was required to submit a third submission in September 2013

that would address its business-case analyses for shared services to be 

implemented in fiscal year 2014.

In addition to determining whether DOD’s submissions addressed the 

statutory requirements, we determined the extent to which DOD 

incorporated key management practices derived from GAO’s past work 

into its March and June 2013 submissions. DOD’s submissions of its plan 

for MHS governance reform provided some useful information but did not 

fully incorporate some key management practices that we have found 

promote effective planning, implementation, and oversight in managing 

successful business-process reengineering. In discussing DOD’s required 

submissions with officials, they said that they followed the guidance in our 

Business Process Reengineering Assessment Guide as they moved 

forward. This guide covers a wide range of activities, such as identifying 

DOD’s Submissions 

for Its MHS Reform 

Largely Met Statutory 

Requirements but Did 

Not Fully Incorporate 

Some Key 

Management 

Practices 
 

Page 14 GAO-14-49 DOD's 2013 Medical Governance Plans

mission and goals, establishing performance measures to gauge 

progress, developing a sound business case for implementing the new 

process, and identifying appropriate staffing levels.17 DOD’s submissions 

do reflect some of these practices, including information on how DOD 

believes the goals for the reform would result in improvements and 

savings within the MHS and high-level business-case analyses for its 

efficiency efforts. However, DOD’s submissions did not fully incorporate 

these key management practices because they did not include clear, 

quantifiable, objective performance measures and a baseline assessment 

of current performance; interim timelines for meeting four of the seven 

goals; complete implementation costs for its business-case analyses for 

shared services; and estimated personnel levels for full operating 

capability. The inclusion of such information would help more-fully explain 

how DOD intends to implement and oversee this significant transition.

DOD’s March 2013 submission for MHS governance reform was required 

to contain goals to achieve while carrying out the reform—including goals 

with respect to improving clinical and business practices and reductions in 

costs, infrastructure, and personnel. In the March submission, DOD 

addressed this requirement by presenting the goals of the reform in the 

form of one overall strategic goal and seven subordinate goals. DOD’s 

overarching strategic goal for its MHS is to achieve greater system 

integration. Its seven subordinate goals are as follows:

(1) promote more-effective and efficient health care operations through 

enhanced enterprise-wide shared services;

(2) deliver more-comprehensive primary care and integrated health 

services using advanced patient-centered medical homes;

(3) coordinate care over time and across treatment settings to improve 

outcomes in the management of chronic illness, particularly for 

patients with complex medical and social problems;

(4) match personnel, infrastructure, and funding to current missions, 

future missions, and population demand;

(5) establish more interservice standards and metrics, and standardize 

processes to promote learning and continuous improvement;

 

17GAO/AIMD-10.1.15. 

Some of DOD’s Goals 

Presented in Its March 

2013 Submission Were Not 

Clearly Linked to the 

Responsibilities of the 

DHA but Were Later 

Clarified
 

Page 15 GAO-14-49 DOD's 2013 Medical Governance Plans

(6) create enhanced value in military medical markets using an integrated 

approach specified in 5-year business performance plans; and,

(7) align incentives with health and readiness outcomes to reward value 

creation.

Although DOD met the statutory requirements to submit goals, its initial 

submission did not clearly show the linkage between the goals and the 

mission of the transformation. GAO’s Business Process Re-Engineering 

Assessment Guide states that agencies should develop goals that are 

clearly linked to the agency’s mission and what needs to be accomplished 

to help challenge and motivate an agency to modify its performance.18

According to DOD’s submissions, the strategic vision of the MHS 

transformation is “to deliver a coordinated continuum of preventive and 

curative services to eligible beneficiaries and be accountable for health 

outcomes and cost while supporting the services’ warfighter 

requirements.” DOD has stated that it selected the DHA to be the 

organizational structure that will allow the department to achieve this 

mission by accelerating the implementation of shared services with 

common clinical and business practices.

We found that three of DOD’s subordinate goals—(1) promote moreeffective and efficient health care operations through enhanced 

enterprise-wide shared services; (2) establish more interservice 

standards/metrics, and standardize processes to promote learning and 

continuous improvement; and (3) create enhanced value in military 

medical markets using an integrated approach specified in 5-year 

business performance plans—were clearly linked to the establishment of 

the DHA in that it was clear how the new agency would be responsible for 

implementing or supporting these goals. However, we found that the 

remaining four subordinate goals—(1) deliver more-comprehensive 

primary care and integrated health services using advanced patientcentered medical homes; (2) coordinate care over time and across 

treatment settings to improve outcomes in the management of chronic 

illness, particularly for patients with complex medical and social problems; 

(3) match personnel, infrastructure, and funding to current missions, 

future missions, and population demand; and, (4) align incentives with 

health and readiness outcomes to reward value creation—did not clearly 

link to the DHA’s proposed responsibilities, because either the 

 

18GAO/AIMD-10.1.15. 
 

Page 16 GAO-14-49 DOD's 2013 Medical Governance Plans

responsibilities stemming from the four subordinate goals already belong 

to the services or the goal is not clearly defined. Moreover, in some 

cases, the function could be achieved regardless of the existence of the 

DHA. For example, one of the goals is to deliver more-comprehensive 

primary care and integrated health services using advanced patientcentered medical homes. However, the services are responsible for 

delivering all primary care, and as such, DOD officials told us that each 

service began implementing its own patient-centered medical homes 

model approximately 3 years prior to the establishment of the DHA as a 

means to address concerns in growing dissatisfaction with patient care. 

Another goal of the reform is to coordinate care over time and across 

treatment settings to improve outcomes in the management of chronic 

illness, particularly for patients with complex medical and social problems. 

However, this function was already being performed prior to the 

establishment of the DHA, as the services are currently responsible for 

coordinating care across treatment settings.

Subsequent to DOD’s submission of its goals in its March 2013 

submission and our May 2013 congressional briefing on our preliminary 

observations of this submission, the House Report accompanying the 

proposed National Defense Authorization Act for Fiscal Year 2014 

directed the Secretary of Defense to provide the House Armed Services 

Committee with more information concerning how DOD developed its 

goals and to clarify the linkage of the goals to the responsibilities of the 

newly formed DHA. DOD responded to this direction by providing 

additional details in its June 2013 submission that were absent from its 

March 2013 submission. Specifically, DOD explained who derived and 

approved the goals, what responsibilities the new DHA would have in 

achieving its goals, and how clinical and business practices would be 

improved with the creation of the DHA, as well as what cost, 

infrastructure, and personnel reductions could be expected from this 

reform. In the June submission, DOD stated the seven goals were 

derived and endorsed by the MHS leadership, including the Surgeons 

General of the services. In addition, DOD provided an explanation as to 

how each goal related to the DHA. For instance, DOD explained that 

implementation of the patient-centered medical home model on a servicespecific basis had resulted in significant clinical and business process 

variation among the services, along with use of different metrics. 

According to DOD’s June 2013 submission, the DHA will standardize the 

patient-centered medical home model through, among other means, the 

DHA Health Care Operations Directorate, which will monitor enterprise 

performance with measures applied consistently across the services, 

such as standardized business processes for appointments and referral 
 

Page 17 GAO-14-49 DOD's 2013 Medical Governance Plans

management. In addition, in its June 2013 submission, DOD provided an 

explanation of the clinical and business-practice improvements and cost, 

infrastructure, and personnel reductions to be realized for each goal. For 

instance, a DOD study found a significant positive effect on various cost 

and utilization metrics at three patient-centered medical home 

implementation sites, including lower utilization rates of inpatient services, 

emergency room, and urgent care services, with decreases in per 

member per month costs. In its June 2013 submission, DOD explained 

that on the basis of this study, it anticipates that using the DHA to 

monitor, evaluate, and promulgate patient-centered medical home 

successes should result in costs reductions across the Military Health 

System.

DOD’s June 2013 submission was required to include performance 

measures to evaluate the achievement of each reform goal with respect 

to the purpose, objective, and improvements made by each goal. We 

found that DOD addressed this requirement because it listed in its June 

2013 submission 87 different performance measures aligned under the 

seven subordinate goals.19 However, in analyzing the measures DOD 

included in the submission, we found those measures do not exhibit 

important attributes of successful performance measures that we 

established in our prior work. We have previously reported20 that federal 

agencies engaging in large projects, including consolidating management 

functions, can use performance measures to determine how well they are 

achieving their goals and identify areas for improvement, if needed. 

Additionally, we have found that by tracking and developing a 

performance baseline for all measures, agencies can better evaluate 

progress made and whether or not goals are being achieved. By using 

performance measures, ongoing monitoring, and reporting on activities in 

a transparent manner, key decision makers can obtain feedback for 

improving both policy and operational effectiveness. Identifying and 

reporting deviations from the baseline as a program proceeds provides 

valuable information for oversight by identifying areas of program risk and 

their causes to decision makers. Through our prior work on performance 

 

19Some performance measures were used to assess multiple objectives.

20GAO-12-542. 

DOD Addressed Statutory 

Requirement to Provide 

Performance Measures; 

However, the Measures Do 

Not Fully Meet Best 

Practices
 

Page 18 GAO-14-49 DOD's 2013 Medical Governance Plans

measurement, we have identified several important attributes of 

performance measures (see table 1).21

Table 1: Attributes of Performance Measures

Attribute Definition

Balance A suite of measures ensures that an organization’s various priorities are covered.

Clarity Measure is clearly stated, and the name and definition are consistent with the methodology used 

to calculate it.

Core program activities Measures cover the activities that an entity is expected to perform to support the intent of the 

program.

Government-wide priorities Each measure covers a priority such as quality, timeliness, and cost of service.

Limited overlap Measures provide new information beyond that provided by other measures.

Linkage Measure is aligned with division and agency-wide goals and mission and is clearly 

communicated throughout the organization. 

Measurable target Measure has a numerical goal.

Objectivity Measure is reasonably free from significant bias or manipulation.

Reliability Measure produces the same result under similar conditions.

Baseline and Trend Data Measure has a baseline and trend data associated with it to identify, monitor, and report 

changes in performance and to help ensure that performance is viewed in context. 

Source: GAO.

In its June 2013 submission, DOD listed 87 performance measures to 

assess its seven goals, and provided only the measures’ names with no 

accompanying explanation, definition, or a quantifiable, numerical target 

for performance. For example, DOD listed “HEDIS preventive measures” 

as a performance measure without an accompanying explanation or 

definition. Another measure DOD listed was “TRICARE Service Centers,” 

which does not indicate specifically what aspect of the service centers is 

to be observed and measured. Further, decision makers using the 

submission will be unable to determine to what extent there is overlap 

among the measures because DOD did not provide an explanation of 

what each measure will evaluate, which could be used to determine 

 

21GAO, Tax Administration: IRS Needs to Further Refine Its Tax Filing Season 

Performance Measures, GAO-03-143 (Washington, D.C.: Nov. 22, 2002); GPRA 

Performance Reports, GAO/GGD-96-66R, (Washington, D.C.: Feb. 14, 1996); Missile 

Defense: Opportunity to Refocus on Strengthening Acquisition Management, GAO-13-432

(Washington, D.C.: Apr. 26, 2013); Performance Measurement and Evaluation: Definitions 

and Relationships, GAO-11-646SP (Washington, D.C.: May 2011); and Agency 

Performance Plans: Examples of Practices That Can Improve Usefulness to 

Decisionmakers, GAO/GGD/AIMD-99-69 (Washington, D.C.: Feb. 26, 1999).
 

Page 19 GAO-14-49 DOD's 2013 Medical Governance Plans

whether the measures provide new information beyond that provided by 

other measures. For example, two of the measures listed under its 

second goal are “satisfaction with provider communications” and 

“satisfaction with health care.” As presented in the submission, it is not 

possible to determine whether there is any overlap between these 

measures, because the aspects of satisfaction are not clarified by any 

accompanying explanation. In addition, decision makers will not be able 

to determine the objectivity of DOD’s measures because there is no 

information accompanying the measures that indicates specifically what is 

to be observed, in which population or conditions, and in what time frame. 

Such information would allow them to determine whether the measures 

are reasonably free from significant bias or manipulation. For example, 

one of the measures is “savings achieved versus savings projected.” This 

measure does not indicate specifically how savings will be measured, nor 

does it indicate what time frame will be used to compare what savings 

were projected versus what was actually saved. As we have previously 

reported, performance measurement is the ongoing monitoring and 

reporting of program accomplishments, particularly progress toward 

preestablished goals.22 It, additionally, involves identifying performance 

goals and measures, including establishing performance baselines by 

tracking performance over time, identifying targets for improving 

performance, and measuring progress against those targets.23 In its June 

2013 submission, DOD did not include numerical targets for performance 

or a performance baseline for its measures. DOD only listed the names of 

the performance measures with no accompanying information about the 

state of current performance or goals for performance improvement.

Senior DOD officials responded that the statute did not call for such 

detailed information, but instead just required the inclusion of 

performance metrics to evaluate the achievement of each goal. However, 

without such information, as well as identifying numerical targets and 

baseline assessments of current performance, decision makers will lack 

 

22GAO-11-646SP. 

23GAO, Aviation Weather: Agencies Need to Improve Performance Measurement and 

Fully Address Key Challenges, GAO-10-843, (Washington, D.C.; Sept. 9, 2010). 

Department of the Navy, Office of the Chief Information Officer, Guide for Developing and 

Using Information Technology (IT) Performance Measurements (Washington, D.C.: 

October 2001); and General Services Administration, Office of Governmentwide Policy, 

Performance-Based Management: Eight Steps To Develop and Use Information 

Technology Performance Measures Effectively (Washington, D.C.: 1996).
 

Page 20 GAO-14-49 DOD's 2013 Medical Governance Plans

transparency over DOD’s efforts to achieve change from the very start.

DOD officials also explained that the proposed measures in the 

submission represent a mix of existing measures and measures yet to be 

developed or enhanced. However, they did not clearly indicate in the 

submission which metrics currently exist and which will need to be 

developed. Without transparent explanations of (1) why and how the 

selected performance measures are linked to specific goals, (2) the 

numerical targets for performance, and (3) a baseline of current 

performance for each measure, DOD officials and other decision makers, 

including members of Congress, will find it difficult to determine whether 

DOD’s medical governance reform efforts are on track to achieve desired 

results or need corrective actions.

DOD’s March 2013 submission was required to include a detailed 

schedule for carrying out the reform of the governance of the MHS, 

including a schedule for meeting the goals of the reform. In that 

submission, DOD provided a schedule of activities leading up to its first 

major milestone—initial operating capability of October 1, 2013—to 

establish the (1) DHA, (2) enhanced Multi-Service Markets, and (3) 

National Capital Region Directorate. We found that DOD partially 

addressed its statutory requirement to provide information about its 

schedule for carrying out the reform because the submission included a 

schedule of activities; however, it did not provide information related to 

activities beyond its first major milestone and it did not present milestones 

for achieving each of the supporting seven goals of the reform.

Moreover, the schedule presented in DOD’s submission did not include 

some key features of effective schedules identified in our prior work, such 

as interim milestones or related timelines for all of the activities supporting 

the reform. We have found in previous work that interim milestones can 

be used to show progress towards implementing efforts or to make 

adjustments when necessary.24 Specifically, we have reported that 

developing and using specific milestones and timelines to guide and 

gauge progress toward achieving an agency’s desired results informs 

management of the rate of progress toward achieving goals or whether 

adjustments need to be made in order to maintain progress within given 

 

24GAO/GGD/AIMD-99-69 and GAO, Executive Guide: Effectively Implementing the 

Government Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 

1996).

DOD’s Schedule for 

Reform Lists Steps to 

Reach Initial Operating 

Milestone but Does Not 

Address Subsequent 

Milestones or Include 

Steps to Achieve All Seven 

Reform Goals
 

Page 21 GAO-14-49 DOD's 2013 Medical Governance Plans

time frames. Further, according to GAO’s Business Process ReEngineering Assessment Guide, agencies undergoing business 

transformations should develop a detailed implementation plan that lays 

out what needs to be done to achieve implementation of the new process 

by identifying milestones and specifying timetables for all actions so that 

progress can be closely monitored. However, DOD’s March 2013 

submission did not include these important interim milestones that help 

measure progress being made to reach goals. For example, while DOD’s 

submission included a series of actions to be completed to establish the 

DHA by October 1, 2013—the initial operating capacity date—it provided 

only one milestone respectively for the establishment of the enhanced 

Multi-Service Markets and the National Capital Region Directorate by that 

date, but no interim actions or milestones that could help monitor the 

progress of those efforts. In addition, the submissions did not contain any 

interim actions or milestones between October 1, 2013, and October 1, 

2015—the planned final operating capacity date. Furthermore, the 

schedule provided in the submission does not clearly establish how each 

of the supporting seven goals of the reform will be met. While a senior 

DOD official explained to us how the schedule’s activities relate to each 

goal, this is not laid out in the submission itself. For instance, one of the 

goals is to deliver more-comprehensive primary care and integrated 

health services using advanced patient-centered medical homes. 

However, it is unclear from the submission how the timeline as presented 

relates to this goal because none of the dates in the schedule refer to 

patient-centered medical homes.

Subsequent to DOD’s submission of the schedule in its March 2013 

submission, the House Report accompanying the proposed National 

Defense Authorization Act for Fiscal Year 2014 directed the Secretary of 

Defense to provide the House Armed Services Committee with a detailed 

schedule for managing the reform effort. In response, DOD submitted a 

supplemental report on August 16, 2013, that included estimated interim 

milestones for the achievement of three of the reform goals that it had not 

initially provided in either of its earlier submissions. However, with respect 

to the four goals that milestones were provided for in the March 2013 

submission, DOD only provided milestones leading up to initial operating 

capability. In the August supplemental report, DOD has not identified 

interim milestones necessary from initial operating capability to achieve 

full operating capability. Unless DOD develops interim milestones for its 

reform timelines, it may not be able to adequately monitor its progress 

toward achieving its goals by 2015.
 

Page 22 GAO-14-49 DOD's 2013 Medical Governance Plans

DOD’s June 2013 submission was required to include detailed 

information in a business-case analysis for each shared service that was

to be implemented during fiscal year 2013. However, DOD did not 

implement any shared services in fiscal year 2013, and thus it was not 

required by statute to provide business-case analyses for any shared 

services in its June 2013 submission. Nonetheless, DOD included a 

discussion of the first four shared services it plans to implement in fiscal 

year 2014, which were medical logistics, facilities planning, health 

information technology, and the health care plan. The information in 

DOD’s June 2013 submission generally reflected key characteristics of 

business-case analyses; however, DOD did not present sufficient 

information to explain the basis for its cost-savings estimates. According 

to GAO’s Business Process Reengineering Assessment Guide, an initial 

business case is essentially a high-level document aimed at convincing 

customers and stakeholders that reengineering the selected business 

process is the appropriate means for achieving performance and costsavings goals. As the reengineering process matures, it should include 

detailed qualitative and quantitative analysis in support of selecting and 

implementing the new process that includes a statement regarding 

benefits, costs, and risks. DOD officials stated that the business case 

analyses they developed regarding the shared services to be 

implemented were informed by information from our previous reports on 

their medical governance efforts and specifically our Business Process 

Reengineering Assessment Guide. 

While DOD was not required to present its business-case analyses for its 

shared services until its September 2013 submission, we found that the 

information on the four shared services included in the June 2013 

submission contained a number of elements that help make the case for 

shared services. Specifically, the information presented included 

discussion of the consolidation efforts’ purpose, the scope of services to 

be consolidated, the responsibilities of the new shared service entities, 

estimated implementation costs and cost savings, a timeline of events, 

and measures of success. DOD’s submission also provided a breakdown 

of estimated implementation costs, with specific estimates for information 

technology, contractor support, personnel severance, personnel 

relocation, and military construction.

However, DOD’s submission did not include similarly detailed quantitative 

analysis regarding the sources of its cost-savings estimates or provide a 

basis for or an explanation of key assumptions and rationales used in 

estimating such savings. For example, while the proposed medical 

logistics shared service is composed of three business lines—supplies, 

DOD’s Cost-Savings 

Estimates Presented for 

Shared Services Generally 

Reflect Key Characteristics 

of Business-Case Analyses, 

but Do Not Provide 

Critical Details Concerning 

Cost Savings
 

Page 23 GAO-14-49 DOD's 2013 Medical Governance Plans

equipment, and housekeeping services—DOD’s savings estimate is not 

similarly differentiated, and is presented as a single net savings range of 

between $132 million and $353 million from fiscal year 2014 through 

fiscal year 2019. Similarly, DOD’s June 2013 submission states that it 

plans to achieve savings in administration of the TRICARE Health Plan by 

closing walk-in help centers and transitioning to a phone-based system 

and better coordinating TRICARE benefit payments with other health 

insurers. However, DOD’s savings estimate is not similarly differentiated, 

and instead is presented as an aggregated net savings range of between 

$503 million and $787 million. As DOD moves forward with the 

implementation of shared services, transparent and clear business-case 

analyses could assist DOD in making the case for consolidation of 

business lines. By not providing a detailed quantitative analysis regarding 

the sources of cost savings in its June 2013 submission, DOD’s 

aggregated estimate obscures the relative size, cost, and potential 

uncertainties or risks associated with forming a shared service. Further, 

the absence of such information in this submission does not allow 

necessary oversight of DOD’s effort to benefit from a thorough 

understanding of how savings estimates were calculated and are planned 

to be achieved.

DOD also presented a risk-adjusted estimate of net cost savings for 

shared services based on uncertainty regarding the effectiveness of its 

consolidation efforts, but did not similarly consider the effect of potential 

increases in implementation costs. DOD’s submission provides a highlevel cost-savings estimate, an itemized implementation cost estimate, 

and a range of net savings for each of the four shared services to be 

implemented in fiscal year 2014. The cost-savings estimates are adjusted 

for risk related to the likelihood of achieving the cost savings and are 

presented as a range, with a 10 percent to 100 percent chance of 

achieving the maximum estimated savings for each shared service. 

Implementation costs are then subtracted from the maximum and 

minimum cost savings to present a range of possible net savings. 

According to DOD’s estimates, each shared service is expected to 

achieve savings even when adjusted according to these risk factors. 

However, while DOD assessed the risk of its reforms failing to achieve 

their maximum potential cost savings, it did not similarly assess the risk 

that estimated implementation costs may increase.

DOD’s past experience in managing the implementation of large scale 

projects demonstrates that rising implementation costs can reduce or 

negate potential savings. For example, as we have previously reported, 

after obligating approximately $2 billion over the 13-year life of its initiative 
 

Page 24 GAO-14-49 DOD's 2013 Medical Governance Plans

to acquire an electronic health record system, as of September 2010, 

DOD had delivered various capabilities for outpatient care and dental 

care documentation, but scaled back other capabilities it had originally 

planned to deliver, such as replacement of legacy systems and inpatient 

care management. In addition, users continued to experience significant 

problems with the performance (speed, usability, and availability) of the 

portions of the system that have been deployed.25 According to DOD’s 

estimates, collectively, the four shared services to be implemented as 

part of the MHS reform in fiscal year 2014 require an investment in 

information-technology capabilities of about $233 million between fiscal 

years 2014 and 2019. According to GAO’s Business Process 

Reengineering Assessment Guide, business-case analyses should 

demonstrate the sensitivity of the outcome to changes in assumptions, 

with a focus on the dominant benefit and cost elements and the areas of 

greatest uncertainty.26 Given DOD’s past experience in this area, rising 

implementation costs are an area of specific concern. Should informationtechnology costs or any of the other five cost categories DOD included in 

its estimate increase significantly, implementation costs could reduce or 

even negate potential cost savings. 

DOD’s June 2013 submission was required to include the personnel 

levels required for the DHA and the National Capital Region (NCR) 

Directorate. DOD met the statutory requirement by providing a table that 

gave a number of personnel expected for both the DHA and specifically 

for the subordinate NCR Directorate. DOD’s preliminary estimate of the 

DHA staffing as of October 1, 2013, would be 1,081 people with 42 of 

them specifically located within the NCR Directorate. However, DOD does 

not currently have the necessary information to determine how the 

creation of the DHA will affect the total number of MHS headquarters 

staff.27 In recent years, DOD has placed increased emphasis on efficiency 

within its headquarters operations. For example, in 2010, the Secretary of 

Defense directed a departmentwide assessment of overhead, including 

how the department is staffed, organized, and operated, with the goal of 

 

25GAO, Information Technology: Opportunities Exist to Improve Management of DOD’s 

Electronic Health Record Initiative, GAO-11-50, (Washington, D.C.: Oct. 6, 2010). 

26GAO/AIMD-10.1.15. 

27According to DOD officials, MHS headquarters staff includes all personnel in commands 

and agencies that manage the MHS above the level of direct hospital administration. 

DOD Currently Cannot 

Estimate How the DHA 

Will Affect MHS 

Headquarters Staff Levels
 

Page 25 GAO-14-49 DOD's 2013 Medical Governance Plans

reducing excess overhead costs and reinvesting these savings toward 

other priorities. The assessment identified efficiencies that were 

estimated to achieve about $178 billion in projected savings across the 

military departments and other DOD components from fiscal year 2012 

through fiscal year 2016. In 2012, DOD published defense strategic 

guidance to direct defense priorities and spending over the coming 

decade stating that DOD must continue to reduce the cost of doing 

business, which includes finding further efficiencies in overhead and 

headquarters, in its business practices, and in other support activities.28 In 

addition, in July 2013, the Deputy Secretary of Defense announced a 20

percent reduction in DOD management headquarters spending over 5 

fiscal years beginning in fiscal year 2014. Our previous work29 has 

highlighted the need for agencies to have valid, reliable data and be 

aware of the size of their workforce, its deployment across the 

organization, and the knowledge, skills, and abilities needed for the 

agency to pursue its mission.30 This requirement extends beyond 

awareness of military and civilian personnel and includes DOD’s large 

contractor workforce. DOD policy requires the consideration of all 

available personnel sources when determining manpower mix to 

accomplish a mission, including military and civilian personnel, as well as 

contractors.31 Given the lack of current information, it is unclear what 

effect the DHA will have on total MHS headquarters staff levels.

When choosing among different governance models for the MHS in 2011, 

DOD estimated that its preferred option, which ultimately became the 

DHA, would save DOD $46.5 million per year in reduced personnel costs. 

However, while DOD officials told us in July 2013 that there will be no net 

increase in personnel numbers across the MHS headquarters as a result 

of the creation of the DHA, they do not have a numerical estimate of 

staffing at full operating capability. DOD’s June 2013 submission includes 

an estimate of staffing, as required by statute, but the estimate is at the 

new agency’s initial operating capability on October 1, 2013. According to 

 

28Department of Defense, Sustaining U.S. Global Leadership: Priorities for 21st Century 

Defense, (Jan. 3, 2012).

29GAO/AIMD-10.1.15. 

30GAO, A Model of Strategic Human Capital Management, GAO-02-373SP, (Washington, 

D.C.: March 2002). 

31DOD Directive 1100.4, Guidance for Manpower Management (Feb. 12, 2005).
 

Page 26 GAO-14-49 DOD's 2013 Medical Governance Plans

DOD officials, DOD’s initial operating capability staff estimate includes 

current TRICARE Management Activity headquarters’ staff, the NCR 

Directorate, and initial estimates of personnel for the four shared services 

functions DOD plans to implement in fiscal year 2014. It does not include 

an estimate of additional personnel for the other six shared services DOD 

plans to implement at a later point or any other staff necessary to reach 

full operating capability. Additionally, this estimate does not include any 

contractor positions currently associated with TRICARE Management 

Activity, the shared services, or other headquarters functions. Contractors 

form an integral part of DOD’s workforce, and as noted above, DOD 

policy requires consideration of all sectors of the workforce when 

determining workforce mix, including contractors. Further, according to 

DOD officials, for some of these functions the number of military, civilian, 

and contractor staff at full operating capability could be significantly higher 

than the estimate of initial operating capability provided in the June 2013 

submission. For example, according to a senior official responsible for 

information technology within the MHS, the number of staff for information 

technology at initial operating capability is estimated at about 400 military 

and civilian positions; however, that estimate increases to about 3,500 

military and civilian positions and about 5,000 contractor equivalent 

positions at full operating capability. As a result, the submissions do not 

account for about 3,100 positions that may be assigned to the DHA at full 

operating capability.

DOD is also currently unable to estimate whether the creation of the DHA 

will result in an increase or decrease in DOD health care personnel 

because it has not completed an updated baseline assessment of MHS 

headquarters staff levels. DOD did conduct such a baseline assessment 

of its MHS headquarters staff in 2011 in order to develop cost-savings 

estimates as part of its examination of different possible governance 

models for the MHS. DOD based its decision to establish the DHA, in 

part, on a resulting estimate of $46.5 million in annual personnel savings, 

as noted above. However, according to DOD officials, the military 

services objected to the use of this previous baseline assessment 

because they believed it did not accurately reflect the current number of 

personnel staffed with the MHS headquarters. DOD has encountered 

similar issues in previous efforts to eliminate redundancies and integrate 

services in the MHS, such as the establishment of the Joint Task Force 

National Capital Region Medical (JTF CAPMED), in which officials 

encountered significant challenges developing an accurate, complete, 

and realistic joint manning document that listed all military and civilian 

medical personnel on board. In addition, it is unclear whether DOD plans 

to increase or decrease spending and reliance upon contracted full-time 
 

Page 27 GAO-14-49 DOD's 2013 Medical Governance Plans

equivalents. DOD officials stated that while some efficiency may be 

achieved in headquarters staffing levels, they believe the greatest savings 

are to be achieved through shared services, standardization, and a moreintegrated approach to the MHS as reflected in their plans for the DHA. 

However, by not fully describing estimated staffing levels required for 

implementing the reform of the governance of the MHS, DOD cannot 

provide decision makers with a transparent and complete picture of the 

military, civilian, and contractor resources that will be needed to 

implement the transformation. DOD officials told us that they plan to 

conduct a baseline assessment of headquarters staffing levels and 

submit a revised estimated staffing-level chart in their next required report 

to Congress, which was due on September 30, 2013.

After decades of incremental alterations to its governance structure, DOD 

has moved forward with an approach that it believes will increase 

integration and realize cost savings throughout the MHS, including an 

organized process for the standup of the DHA. In this context, although 

DOD mostly met its statutory reporting requirements in its March 2013 

and June 2013 submissions, the submissions are missing key details that 

are important for oversight of DOD’s implementation of the governance 

reform. Without comprehensive timelines that include interim milestones 

for implementation, as well as clear performance measures that are 

strongly linked to measurable goals and objectives, have targets, and 

include baseline assessments, it will be difficult for decision makers to 

gauge progress and identify areas requiring corrective actions. Similarly, 

without thoroughly explaining the sources of estimated cost savings from 

the implementation of its shared services projects and a means to assess 

the potential for cost increases, decision makers will lack visibility over the 

actual cost implications of implementing these projects, which could 

hinder their ability to achieve cost savings or adjust plans when 

appropriate. Finally, without a baseline assessment of current personnel 

numbers in MHS headquarters and an estimate of the personnel needed 

for DHA at full operational capability, DOD cannot provide decision 

makers the full scope of information they need to understand the full 

magnitude of implementation costs and efficiencies estimated to be 

gained by the reform. Until DOD provides greater clarity and transparency 

with regard to the performance measures, the sources of cost savings, 

the sensitivity of cost savings to rising implementation costs, and total 

staffing requirements, decision makers within DOD and Congress will not 

have critical information to monitor the implementation of the MHS reform 

effort.

Conclusions 
 

Page 28 GAO-14-49 DOD's 2013 Medical Governance Plans

To provide decision makers with more-complete information on the 

planned implementation, management, and oversight of DOD’s newly 

created DHA, we recommend that the Secretary of Defense direct the 

Assistant Secretary of Defense (Health Affairs) to take the following five 

actions:

• Develop and present to Congress performance measures that are 

clear, quantifiable, objective, and include a baseline assessment of 

current performance.

• Develop and present to Congress a comprehensive timeline that 

includes interim milestones for all reform goals that could be used to 

show implementation progress.

• Provide Congress with a more-thorough explanation of the potential 

sources of cost savings from the implementation of its shared services 

projects

• Monitor implementation costs to assess whether the shared-services 

projects are on track to achieve projected net cost savings or if 

corrective actions are needed.

• Develop and present to Congress a baseline assessment of the 

current number of military, civilian, and contractor personnel currently 

working within the MHS headquarters and an estimate for DHA at full 

operating capability, including estimates of changes in contractor fulltime equivalents. 

In written comments on a draft of this report, DOD concurred with our five 

recommendations to guide implementation of the Defense Health Agency. 

DOD’s comments are reprinted in appendix I.

We are sending copies of this report to interested congressional 

committees, the Secretary of Defense, the Deputy Secretary of Defense, 

the Under Secretary of Defense for Personnel and Readiness, the 

Assistant Secretary of Defense (Health Affairs), the Defense Health 

Agency Director, the Surgeon General of the Air Force, the Surgeon 

General of the Army, and the Surgeon General of the Navy. In addition, 

the report is available at no charge on the GAO website at 

http://www.gao.gov. 

Recommendations for 

Executive Action

Agency Comments
 

Page 29 GAO-14-49 DOD's 2013 Medical Governance Plans

If you or your staff have any questions regarding this report, please 

contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix II. 

Brenda S. Farrell

Director

Defense Capabilities and Management
 

Page 30 GAO-14-49 DOD's 2013 Medical Governance Plans

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James N. Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Dick Durbin

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Howard P. “Buck” McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable Chairman

The Honorable Peter Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Comments from the Department of 

Defense

Page 31 GAO-14-49 DOD's 2013 Medical Governance Plans

Appendix I: Comments from the Department 

of Defense
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 32 GAO-14-49 DOD's 2013 Medical Governance Plans

Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov

In addition to the contact named above, Lori Atkinson, Assistant Director; 

Rebecca Beale; Grace Coleman; Jeffrey Heit; Terry Richardson; Adam 

Smith; and Michael Willems made key contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 
Related GAO Products

Page 33 GAO-14-49 DOD's 2013 Medical Governance Plans

Defense Health Care: Additional Analysis of Costs and Benefits of 

Potential Governance Structures is Needed, GAO-12-911 (Washington, 

D.C.: September 26, 2012).

Defense Health Care: Applying Key Management Practices Should Help 

Achieve Efficiencies within the Military Health System, GAO-12-224

(Washington, D.C.: April 12, 2012).

2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP

(Washington, D.C.: Feb. 28, 2012).

Follow-up on 2011 Report, Status of Actions Taken to Reduce 

Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance 

Revenue, GAO-12-453SP (Washington, D.C.: Feb. 28, 2012).

Opportunities to Reduce Potential Duplication in Government Programs, 

Save Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, 

D.C.: Mar. 1, 2011).

Military Personnel: Enhanced Collaboration and Process Improvements 

Needed for Determining Military Treatment Facility Medical Personnel 

Requirements, GAO-10-696 (Washington, D.C.: July 29, 2010).

Defense Health Care: DOD Needs to Address the Expected Benefits, 

Costs, and Risks for Its Newly Approved Medical Command Structure, 

GAO-08-122 (Washington, D.C.: Oct. 12, 2007).

Related GAO Products

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